Brent crude continues to trade higher, hitting $42 after OPEC+ promise to comply with cuts

Oil prices climbed higher on Friday after OPEC+ producers promised to ensure better compliance with agreed supply cuts to offset weaker demand amid the coronavirus pandemic.

Oil prices crept back above the psychological $40 mark on Friday, extending gains made over the course of this week, with the surge spurred by OPEC+ producers promising to ensure better compliance with agreed supply cuts to offset weak demand amid the coronavirus pandemic.

Brent crude is trading 2% higher at $42.38 a barrel at the time of publication, with the US West Texas Intermediate (WTI) up 3% to $40.09 a barrel.

Iraq and Kazakhstan brought in line at OPEC+ meeting

According to a recent report by Reuters, Iraq and Kazakhstan were dragging their heels when it came to complying with the agreed production cuts. But in a recent OPEC+ panel meeting the two countries reportedly promised to ensure better compliance with the production cuts.

‘There is enthusiasm in the market that oil supply is still under control,’ Paola Rodriguez Masiu, analyst at Rystad Energy told Reuters. ‘A positive OPEC+ meeting does that and yesterday’s session helped renew confidence.’

Oil prices have made steady gains this week, helped by the International Energy Agency (IEA) increasing its 2020 oil demand forecast to 91.7 million barrels per day.

WTI on the up again

WTI has been given a significant boost following the Organization of the Petroleum Exporting Countries' (OPEC’s) push to ensure compliance among members on output cuts, according to Chris Beauchamp, chief market analyst at IG.

‘As a result, the price has pushed back towards the highs from 8 June above $40.00, with dip buyers over the past week being rewarded for their patience,’ he added. ‘The bullish view remains in place unless we see a reversal back below $37.50.’

Barclays ups oil price forecast

Despite disappointing global economic forecasts, weak demand and concerns about oversupply, analysts at Barclays raised their 2020 oil price forecast for Brent crude by $4 to $41 a barrel and believe that WTI will trade at an average of $37 this year.

However, analysts at the UK-based bank admitted that prices could fall over the near-term, with the stability of the market highly dependent on consumer behaviours.

Barclays also admitted that renewed fears over a second-wave of coronavirus cases emerging as the world begins to emerge from government-imposed lockdowns will keep prices subdued in the coming months.

‘As we mark to market our [second quarter] estimates and account for a potentially larger [second half] deficit, we raise our 2020 oil price forecasts by $4/b but remain cautious with respect to the curve over the near term,’ Amarpreet Singh, vice president of oil strategy at Barclays, said in a research note on last week.

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